New Hanover County will be raking in money at the expense of cash-strapped rental property owners when the new year rolls around and there doesn’t seem to be much you can do about it this year. While not entirely new, New Hanover County will continue squeezing every dime out of residential landlords with its ‘updated’ personal property tax policy.
According to the official New Hanover County website, personal property tax “includes motor vehicles, boats, campers, trailers, single-wide mobile homes with wheels & axle attached, doublewide trailers with wheels and axle attached, household furnishing or appliances for someone who rented or leased a residence or apartment from you, permanent tagged trailers and airplanes.”. And while most of these items like boats are rarely left behind for rental tenant use, appliances and furnished homes are typical. In our opinion, this ridiculous tax is being used in an aggressive, to our knowledge, never before seen way in North Carolina.
Property Taxes – Home ‘Furnishings’ Hit Hard
With the recent change to their website, our guess is that this wording was added in an attempt to lend credibility to the power grab. Residential landlords in New Hanover County should be worried about the recent ‘clarification’ of personal property in rental homes – “household furnishing or appliances for someone who rented or leased a residence or apartment from you”. These items include basic kitchen appliances, left behind washers and dryers, and even that old couch you’ve left sitting in the sunroom for tenant use. So if you have a refrigerator in your rental investment property you are leasing, as most landlords do, you will be charged a personal property tax that is ridiculously high by their default property values calculation.
Here is a real example we recently encountered: New Hanover County recently assessed a $16,960 tax to one landlord for a refrigerator, stove, washer, and dryer. Considering the age and quality of these items, they would net approximately $700 if sold used. If these same items were purchased brand new, they would run 2K max.
The idea here is simple. If New Hanover County applied reasonable and honest property values to the personal items they are taxing, they would be losing more money than they could ever gain in manpower, supplies, postage, etc. However, to offset this obvious problem the County has chosen to attribute an arbitrary massive value calculation of 10% of total property tax. Yes, that’s 10% of what they charge for your entire house! This ensures their efforts do indeed contribute to their bottom line at the expense of unaware landlords. However, for those sharp enough to contest this shocking disregard for reasonable treatment, the bill would likely be lowered so much as to make this process a massive budget drain rather than a benefit to the county.
To put it in perspective, Victory alone manages nearly 600 homes in the area, and a vast majority – at best a few – contain personal property close to 10% of the value of the home. That being a fact, one has to ask why on earth would our county default to such an unreasonable calculation?
Here is the current property taxes burden for a landlord that utilizes a basic appliance in a rental property;
- You’re charged a sales tax on your new appliance at purchase.
- New Hanover Country will tax you yearly for that appliance.
- You’re then again taxed for that appliance when you sell the property and leave it behind.
To call this excessive would be an understatement. Most landlords are already paying several real estate taxes including state income tax, federal income tax, local real property tax, sales tax when purchasing basic supplies/appliances, local excise taxes when selling, and possibly capital gains taxes. Now, not only are property investors in New Hanover county concerned about their monthly and yearly cash flow, the usual maintenance costs associated with owning a rental property, and the costs of capital improvements, but they must now consider rent increases to offset this complex personal property tax with no personal gain. This is especially bad news for tenants looking for affordable housing as taxes and fees like this usually trickle down potentially causing rental losses for homeowners facing long vacancy periods.
This severe and unfair over-application of law in New Hanover County could be the start to other unfair laws, or over-application of those currently existing, as is the case here. As we all know, new taxation is a very slippery slope. Furthermore, the county is clearly counting on busy landlords overlooking their egregious overvaluations, a tactic that seems predatory at best.
What’s Considered Personal Property and What’s its True Value?
Any property fixed or mounted to the property is not personal property and should never be considered for this tax. That means tv mounts, curtain rods, mounted microwaves, built-in stoves/ovens (exclude the more common slide-in), dishwashers, and pretty much anything screwed or bolted to the actual home.
The other step to a successful contest is to utilize math, as opposed to esoteric or emotional defenses. Go on Craigslist and find very similar used goods for sale and include those ads as well as the values in your contest. Then find similar new goods and include those ads in your calculations. Itemize the items in question with used and new values in two columns, total them up, and include a total used value, as well as the new value. Multiply this by your stated tax rate and you’ll arrive at a fair range that will be very hard for the county to dispute. Make sure not to include fixtures and don’t forget to include the actual ads!
Our Final Thoughts
Perhaps instead of wasting tax dollars enacting brand new unheard of taxes to collect pennies from cash strapped landlords (and huge sums from those they dupe), NHC should simply learn to manage their finances sensibly and foster an environment where their subjects have an incentive to produce rather than looking for places to flee to. No other county in North Carolina has such obscene taxes for landlords.
Homeowners should see this as an opening salvo and fight it as hard as they can. It’s a severe, unfair overreach and over-application of a law in NC that no other county to our knowledge has attempted. If successful it will be just the start and will likely infect other counties and laws as the tax/bad financial management virus so often does.